Sensex nears 10% correction. Should you be worried?

The Indian stock market's stellar run has hit a speed bump. After surging nearly 17 per cent until September 2024, the Sensex crashed almost 10 per cent from its record level of 85,000, which it touched five weeks ago.

A notable market correction of over 10 per cent last occurred over two years ago in February 2022, triggered by the Russia-Ukraine conflict. Since then, markets have largely moved upward. It is, thus, natural for many investors to feel unsettled by the ongoing downturn and give in to panic.

However, equity investing is a long-term endeavour that rewards consistency and patience . Historical data attests to that. It shows that the longer one stays invested after minor corrections, the better their chances of steady returns are.

What past data shows

Historically, after a 10 per cent crash within five weeks, markets gave steady double-digit returns only 44 per cent of the time over the subsequent five years. However, this increased to nearly 75 per cent of the time over a period of seven years.

The odds of healthy double-digit returns drastically improve when you increase your investing timeline. The chances of negative returns also drop from 10 per cent over five years to 6 per cent over seven years following similar corrections.

What you should do

• Be patient. Knee-jerk reactions during market corrections often lead to poor investment outcomes. The longer you stay invested, the better your chances are of earning decent returns.
  
• Check your portfolio's asset allocation and rebalance, if necessary, to maintain the desired allocation so you don't take on undesired risks.
  
• Continue your SIPs . Regular investing during market downturns can help average out your investment costs.

Also read: Market has corrected recently. Is this a window of opportunity for investors?

This article was originally published on November 05, 2024.